During a recession many people have lost their income and are struggling to get by. Credit cards are a last resort for those who need to put food on the table and make ends meet. Banks make it harder to apply for credit cards for fear of taking on the risk of people defaulting and having to foot the bill. There are a few different situations that someone can be in and how to strategically apply for credit cards for more points or benefits that can help someone get through these rough times.

Tough Situation

If you are struggling to get by or might be in a potential financial issue, the best credit cards are the ones that have three requirements:

  1. 0% interest rate on purchases for a set period of time (usually 12-18 months)
  2. No annual fee
  3. Small sign-up bonus

The first requirement is more of a safety net. I am NOT encouraging you to rack up a ton of unnecessary debt, but in times of a recession and tough times, if you need to put food on the table and make ends meet, a 0% interest rate on purchases are a huge help. However, this perk should be used as only the LAST resort. Use the card as you would with a debit card by only spending what you need.

The second requirement is quite simple…Why pay annual fees when money is tight and you have many other no annual fee options? In other economic situations, there are credit cards that warrant an annual fee because of high sign-up bonuses and great reward multipliers in categories like groceries.

The third requirement is a bonus. There are cards that offer a “Earn $200 after spending $500 in three months”. If your grocery bill in three months add up to $500, this is essentially a free $200 that banks would give you. There are currently a few offers for this, such as the Chase Freedom ($200 after $500 spend), Chase Freedom Unlimited ($200 after $500 spend), Bank of America Rewards card ($200 after $1000), and the Wells Fargo Propel card ($200 after $1000 spend).

The idea behind getting credit cards during recessions is that you want to continue building your credit score without having to pay fees or interest. Ideally, you would also take advantage of any of the small sign up bonuses available while earning a bit more money for groceries or whatever else you need during a tough situation.

Decent Position

If you are in a decent position, I would be a bit careful because banks tend to tighten up their requirements which makes it harder to get approved and even if you get approved, the credit limits are low. For example, prior to a recession, I got approved for the Chase Sapphire Preferred card for $7800 credit limit. I applied for the Chase Business Ink Cash card during the midst of the recession and I was approved for a $3000 credit limit. For me this is an indication that I am getting closer to being rejected for a credit card from them.

However, I am still going business as usual. I want more business credit cards since I am at 4/24 but both Chase and American Express have their own respective rules on credit card applications. Some credit cards I am currently looking into are the two other Chase Business Ink cards, the Preferred and the Unlimited. After that I am looking into more American Express personal cards.

Great Position

If you fall in this category, I would say continue as you were. If credit card issuers ask for a financial review to validate your income, you would have no issues. Worse case scenario is a hard pull on your credit report that will not affect your score after a year. You can basically apply as is and the only difficulty you may encounter is the credit card issuers tightening their approval rates.

My Take

At the end of the day, continuing to build your credit score during any economic situation is great to do. This prepares your credit score for a future mortgage or car loan. A recession or correctional period does not mean your credit score needs to suffer. As a matter of fact, if you can use these bleak times to your advantage and qualify for great prices on houses or cars, you will end up saving a lot of money in the long term. If there are any questions regarding your position or any other questions, let me know in the comments section below. There will be referral links if you do decide to apply for a credit card that would really help the blog! But until next time…

We appreciate you for letting us be a part of your Break Time.

Checking out, Kenny

Referral Links

American Express : http://refer.amex.us/KENNELLOSZ?XLINK=MYCP

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